II.
PROHIBITED MISREPRESENTATIONS
IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and
employees, and all other persons in active concert or participation with any of them, who
receive actual notice of this Order, whether acting directly or indirectly, in connection with
the advertising, marketing, promoting, or offering of any Business Venture, are
permanently restrained and enjoined from misrepresenting or assisting others in
misrepresenting, including by providing others with the means and instrumentalities with
which to misrepresent, expressly or by implication:
A. That participants will or are likely to earn substantial income;
B. The amount of revenue, income, or profit a participant actually earned or can likely
earn;
C. The reasons participants do not earn significant income, including but not limited to
representations that participants fail to devote substantial or sufficient effort; and
D. Any other fact material to participants concerning the Business Venture, such as:
the total costs to participate, including trainings, brochures, and sales aids; any
material restrictions, limitations, or conditions on operating the Business Venture; or
any material aspect of its performance, efficacy, nature, or central characteristics.
III.
PROHIBITED LIFESTYLE REPRESENTATIONS
IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and
employees, and all other persons in active concert or participation with any of them, who
receive actual notice of this Order, whether acting directly or indirectly, in connection with
the advertising, marketing, promoting, or offering of any Business Venture, are
permanently restrained and enjoined from representing that participation in the Business
Venture is likely to result in a lavish lifestyle, and from using images or descriptions to
represent or imply that participation in the Business Venture is likely to result in a lavish
14
lifestyle. For the purposes of this Section, the following are examples of prohibited claims
when made to a general audience of prospective or current participants:
A. Statements that participants can “quit your job,” “be set for life,” “earn millions of
dollars,” “make more money than they ever have imagined or thought possible,”
“realize unlimited income,” or any substantially similar representations; and
B. Descriptions or images of opulent mansions, private helicopters, private jets, yachts,
exotic automobiles, or any substantially similar representations.
IV.
PROHIBITION AGAINST MATERIAL OMISSIONS AND UNSUBSTANTIATED
INCOME REPRESENTATIONS
IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and
employees, and all other persons in active concert or participation with any of them, who
receive actual notice of this Order, whether acting directly or indirectly, in connection with
advertising, marketing, promoting, or offering any Business Venture, are permanently
restrained and enjoined from:
A. Failing to disclose, clearly and conspicuously, before any potential participant pays
any money to Defendants, all information material to the decision of whether to
participate in the Business Venture, including, but not limited to whether
Defendants have a refund or buyback policy and if so, all material terms and
conditions of the refund or buyback policy, including the specific steps consumers
must follow to obtain a refund or buyback; and
B. Making any representation, expressly or by implication, regarding the amount or
level of income, including full-time or part-time income, that a participant can
reasonably expect to earn unless the representation is non-misleading and, at the
time such representation is made, Defendants possess and rely upon competent and
reliable evidence sufficient to substantiate that the representation is true. Implied
representations regarding the amount or level of income that a participant
15
reasonably can expect to earn include but are not limited to representations
involving and images used to show an improved lifestyle.
V.
COMPLIANCE MONITORING BY DEFENDANTS
IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents,
employees, and all other persons in active concert or participation with any of them, who
receive actual notice of this Order, whether acting directly or indirectly, in connection with
advertising, marketing, promoting, or offering any Multi-Level Marketing Program, are
hereby permanently restrained and enjoined from:
A. Failing to take all reasonable steps necessary to monitor and ensure that Defendants’
agents, representatives, employees, and independent contractors act in compliance
with the requirements of Sections I–IV of this Order. For purposes of this
Subsection, an individual’s status as a Business Opportunity Participant alone does
not render him or her an agent, representative, employee, or independent contractor
of Defendants.
B. Failing to take all reasonable steps necessary to monitor and ensure that Business
Opportunity Participants and Preferred Customers act in compliance with the
requirements of Sections II–IV of this Order.
C. Providing any monetary compensation to any Business Opportunity Participant
when Defendants know or should know that such monetary compensation is or
would be based on claimed transactions that are not in accordance with the
requirements of Section I.
D. Failing to claw back any monetary compensation to any Business Opportunity
Participant when Defendants learn or should have learned that such monetary
compensation was based on claimed transactions that were not in accordance with
the requirements of Section I.
16
E. Failing to implement and maintain a corrective action program that deters and
corrects behaviors of Business Opportunity Participants and Preferred Customers
that are not in compliance with the requirements of this Order.
F. Failing to promptly and thoroughly investigate any complaint received by
Defendants relating to compliance with this Order and to notify the complainant of
the resolution of the complaint and the reason therefor, unless legitimate business
reasons exist not to notify the complainant.
VI.
INDEPENDENT COMPLIANCE AUDITOR
IT IS FURTHER ORDERED that an Independent Compliance Auditor (“ICA”)
shall be appointed to further ensure compliance with Section I.A–F and I.I of this Order, as
set forth below. The ICA shall be an independent third party, not an employee or agent of
the Commission or of Defendants, and no attorney-client or other professional relationship
shall be formed between the ICA and Defendants. No later than sixty (60) days after the
entry of this Order, Commission staff and Defendants shall select the ICA by mutual
agreement. If the parties are unable to agree on an ICA who is willing and able to perform
the ICA’s duties under this Order, they shall submit the matter to the Court for
determination. Defendants shall consent to the following terms and conditions regarding
the ICA:
A. The ICA shall serve, without bond or other security, at the expense of Defendants.
Defendants shall execute an agreement that, subject to the prior approval of
Commission staff, confers upon the ICA all the rights and powers necessary to
permit the ICA to perform its duties and responsibilities pursuant to and in
accordance with the provisions of this Order. Any individual who serves as ICA or
performs duties at the ICA’s direction shall agree not to be retained by the
Commission or Defendants for a period of two years after the conclusion of the
engagement.
17
B. Beginning at the Effective Date applicable to Section I of this Order, the ICA shall
have the duty and responsibility to diligently and competently review, assess, and
evaluate Defendants’ compliance with the following requirements of Section I of
this Order, namely the requirements that:
1. Defendants are paying Multi-Level Compensation only in accordance with
Subsection I.A, and subject to the limitations set forth in Subsections I.D., I.E,
I.F, and I.H;
2. Defendants are differentiating between Preferred Customers and Business
Opportunity Participants as required by Subsection I.B;
3. Defendants are collecting and maintaining retail sales information as required by
Subsection I.C;
4. Defendants are taking all reasonable steps necessary to monitor and ensure that
Profitable Retail Sales and Preferred Customer Purchases are genuine sales of
Products, rather than an attempt to manipulate the program’s compensation plan,
as required by Subsection I.D.1;
5. Defendants are taking all reasonable steps necessary to monitor and ensure that
Profitable Retail Sales in fact occurred as reported in the information collected
and maintained pursuant to Subsection I.D.2;
6. Defendants are complying with the requirements and limitations relating to
claimed Profitable Retail Sales set forth in Subsection I.D.3;
7. Defendants are complying with the requirements and limitations relating to
Rewardable Personal Consumption set forth in Subsection I.E;
8. Defendants are complying with the limitations on thresholds, targets, and
requirements set forth in Subsection I.F;
9. Defendants are complying with and enforcing the requirements and limitations
on leased or purchased business locations set forth in Subsection I.I.
18
C. Subject to the terms of this Order, the ICA shall have authority to engage
professional staff, at the expense of Defendants, to assist the ICA in carrying out the
ICA’s duties and responsibilities.
D. Except for information protected by any demonstrated legally-recognized privilege,
the ICA shall have full and complete access to all reasonably available information
in the possession, custody, or control of Defendants that is relevant to
accomplishing the ICA’s duties and responsibilities described in Section VI.
Defendants may consult with the ICA concerning the ICA’s work, including but not
limited to the ICA’s findings and recommendations, as appropriate.
E. The ICA, and any staff engaged to assist the ICA in carrying out the ICA’s duties
and responsibilities, shall maintain the confidentiality of any of Defendants’
information obtained in accordance with this Order, and shall not disclose such
information to any other person except in accordance with this Order; except that ,
upon request, the ICA shall share records and information with Commission staff.
Nothing in this Section shall affect or impair the Commission’s ability to obtain
records and information pursuant to Section XII.
F. Defendants may require the ICA, and any staff engaged to assist the ICA in carrying
out the ICA’s duties and responsibilities, to sign a customary confidentiality
agreement; provided, however, that such agreement shall not restrict the ICA (and
its representatives) from providing any information to Commission staff.
G. Commission staff may require the ICA, and any staff engaged to assist the ICA in
carrying out the ICA’s duties and responsibilities, to sign an appropriate
confidentiality agreement related to Commission materials and information received
in connection with the performance of the ICA’s duties, and to take other
appropriate steps to protect the confidentiality of the same.
H. The ICA shall serve for seven (7) years after the Effective Date applicable to
Section I of this Order.
19
I. The ICA shall periodically report in writing to Commission staff and to Defendants
on Defendants’ compliance with each of the subsections of Section I. For the first
three (3) years, the ICA shall make such reports every six (6) months, beginning six
months following the Effective Date applicable to Section I. After the first three
(3) years, the frequency of such reports shall be decreased to annually.
J. If, at any time, the ICA determines that Defendants are not in substantial compliance
with Section I.A–F or I.I of this Order, the ICA shall so notify Commission staff and
consult with Defendants. Defendants may at any time submit to Commission staff
and to the ICA a written response to the ICA’s notification.
K. The ICA shall prepare a budget and work plan as follows:
1. No later than ninety (90) days prior to the Effective Date applicable to Section I
of this Order, the ICA shall, in consultation with Commission staff and
Defendants, prepare and present to Commission staff and Defendants an annual
budget and work plan (the “ICA Budget”) describing the scope of work to be
performed and the fees and expenses of the ICA and any professional staff to be
incurred during the first year following the Effective Date of Section I of this
Order.
2. The scope of work, fees, and expenses to be incurred by the ICA and any
professional staff shall be reasonable and not excessive, in light of the ICA’s
defined duties, responsibilities, and powers prescribed in this Order.
3. The ICA shall prepare and submit to Defendants and to Commission staff an
annual ICA Budget no later than ninety (90) days prior to the beginning of each
subsequent year of the ICA’s term. If Defendants and Commission staff both
approve the ICA Budget, the ICA shall adhere to and shall not exceed the
approved ICA Budget, unless such deviations are authorized by agreement of the
parties or order of the Court.
4. Within 21 days of receipt of any ICA Budget, either Commission staff or
Defendants may serve an objection to the ICA, who, within 21 days of such
20
objection, shall provide to Commission staff and Defendants a revised ICA
Budget or a notice that no such revision will be made.
5. Following the ICA’s response to an objection provided in accordance with
Subsection VI.K.3, either Commission staff or Defendants may apply to the
Court to modify the ICA Budget.
6. Pending the Court’s decision concerning any application pursuant to Subsection
VI.K.4, the ICA shall continue to perform its duties and implement the ICA
Budget as prepared by the ICA.
L. Defendants shall indemnify the ICA and hold the ICA harmless against all losses,
claims, damages, liabilities, or expenses arising out of, or in connection with, the
performance of the ICA’s duties, including all reasonable fees of counsel and other
reasonable expenses incurred in connection with the preparations for, or defense of,
any claim, whether or not resulting in any liability, except to the extent that such
losses, claims, damages, liabilities, or expenses result from gross negligence, willful
or wanton acts, or bad faith by the ICA.
M. In the event Commission staff determines that the ICA has ceased to act or failed to
act consistently with the terms of this Subsection, Commission staff may relieve the
ICA of its duties.
N. If the ICA has been relieved of its duties, or if the ICA is no longer willing or able
to continue to serve, Commission staff and Defendants shall mutually agree on a
replacement ICA. If the parties are unable to agree on a replacement ICA within
thirty (30) days, they shall submit the matter to the Court for determination. If more
than three (3) months elapse without an ICA in place, the overall term of the ICA set
forth in Subsection VI.H shall be extended for a commensurate period.
O. Not later than ten (10) days after the appointment of the replacement ICA,
Defendants shall execute an agreement that, subject to the prior approval of
Commission staff, confers upon the replacement ICA all the rights and powers
21
necessary to permit the replacement ICA to perform its duties and responsibilities
pursuant to this Order.
VII.
MONETARY JUDGMENT
IT IS FURTHER ORDERED that:
A. Judgment in the amount of Two Hundred Million Dollars ($200,000,000) is entered
in favor of the Commission against Defendants, jointly and severally, as equitable
monetary relief.
B. Defendant Herbalife International of America, Inc. is ordered to pay to the
Commission Two Hundred Million Dollars ($200,000,000), within 7 days of entry
of this Order by electronic fund transfer in accordance with instructions previously
provided by a representative of the Commission.
C. Defendants relinquish dominion and all legal and equitable right, title, and interest
in all assets transferred pursuant to this Order and may not seek the return of any
assets.
D. The facts alleged in the Complaint will be taken as true, without further proof, in
any subsequent civil litigation by or on behalf of the Commission in a proceeding to
enforce its rights to any payment or monetary judgment pursuant to this Order, such
as a nondischargeability complaint in any bankruptcy case.
E. The facts alleged in the Complaint establish all elements necessary to sustain an
action by the Commission pursuant to Section 523(a)(2)(A) of the Bankruptcy
Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral estoppel effect
for such purposes.
F. Defendants acknowledge that their Taxpayer Identification Numbers or Employer
Identification Numbers, which Defendants must submit to the Commission, may be
used for collecting and reporting on any delinquent amount arising out of this Order,
in accordance with 31 U.S.C. § 7701.
22
G. All money paid to the Commission pursuant to this Order may be deposited into a
fund administered by the Commission or its designee to be used for equitable relief,
including consumer redress and any attendant expenses for the administration of any
redress fund. If a representative of the Commission decides that direct redress to
consumers is wholly or partially impracticable or money remains after redress is
completed, the Commission may apply any remaining money for such other
equitable relief (including consumer information remedies) as it determines to be
reasonably related to Defendants’ practices alleged in the Complaint. Any money
not used for such equitable relief is to be deposited to the U.S. Treasury as
disgorgement. Defendants have no right to challenge any actions the Commission
or its representatives may take pursuant to this Subsection.
VIII.
CUSTOMER INFORMATION
IT IS FURTHER ORDERED that Defendants, Defendants’ officers, agents, and
employees, and all other persons in active concert or participation with any of them, who
receive actual notice of this Order, are permanently restrained and enjoined from directly
or indirectly failing to provide sufficient customer information to enable the Commission
to efficiently administer consumer redress. Defendants represent that they have provided
this redress information to the Commission. If a representative of the Commission requests
in writing any information related to redress, Defendants must provide it, in the form
prescribed by the Commission, within 14 days.
IX.
ORDER ACKNOWLEDGMENTS
IT IS FURTHER ORDERED that Defendants obtain acknowledgments of receipt
of this Order:
A. Each Defendant, within 7 days of entry of this Order, must submit to the
Commission an acknowledgment of receipt of this Order sworn under penalty of
perjury.
23
B. For ten (10) years after entry of this Order, Defendants must deliver a copy of this
Order to: (1) all principals, officers, directors, and LLC managers and members,
including Participants who serve as principals, officers, directors, and LLC
managers and members; (2) all employees, agents, and representatives having
managerial responsibilities concerning conduct covered by Sections I–IV of this
Order; (3) Business Opportunity Participants who are members of the Founder’s
Circle or Chairman’s Club or any group with similar stature under the marketing
plan; (4) any business entity resulting from any change in structure as set forth in the
Section titled Compliance Reporting. Delivery must occur within 7 days of entry of
this Order for current personnel. For all others, delivery must occur before they
assume their responsibilities.
C. From each individual or entity to which a Defendant delivered a copy of this Order,
that Defendant must obtain, within 30 days, a signed and dated acknowledgment of
receipt of this Order.
X.
COMPLIANCE REPORTING
IT IS FURTHER ORDERED that Defendants make timely submissions to the
Commission:
A. One year after entry of this Order, each Defendant must submit a compliance report,
sworn under penalty of perjury. Each Defendant must:
1. Identify the primary physical, postal, and email address and telephone number,
as designated points of contact, which representatives of the Commission may
use to communicate with Defendant;
2. Identify all of that Defendant’s businesses by all of their names, telephone
numbers, and physical, postal, email, and Internet addresses;
3. Describe the activities of each business, including the goods and services
offered, the means of advertising, marketing, and sales, and the involvement of
any other Defendant;
24
4. Describe in detail whether and how that Defendant is in compliance with each
Section of this Order; and
5. Provide a copy of each Order Acknowledgment obtained pursuant to this Order,
unless previously submitted to the Commission.
B. For nine (9) years after entry of this Order, each Defendant must submit a
compliance notice, sworn under penalty of perjury, within 14 days of any change in
the following:
1. Any designated point of contact; or
2. The structure of Defendant or any entity that Defendant has any ownership
interest in or controls directly or indirectly that may affect compliance
obligations arising under this Order, including: creation, merger, sale, or
dissolution of the entity or any subsidiary, parent, or affiliate that engages in any
acts or practices subject to this Order.
C. Each Defendant must submit to the Commission notice of the filing of any
bankruptcy petition, insolvency proceeding, or similar proceeding by or against such
Defendant within 14 days of its filing.
D. Any submission to the Commission required by this Order to be sworn under
penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746,
such as by concluding: “I declare under penalty of perjury under the laws of the
United States of America that the foregoing is true and correct. Executed on:
” and supplying the date, signatory’s full name, title (if applicable), and
signature.
E. Unless otherwise directed by a Commission representative in writing, all
submissions to the Commission pursuant to this Order must be emailed to
DEbrief@ftc.gov or sent by overnight courier (not the U.S. Postal Service) to:
Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade
Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. The subject
line must begin: FTC v. Herbalife, Ltd., et al .
25
XI.
RECORDKEEPING
IT IS FURTHER ORDERED that Defendants must create certain records for nine
(9) years after entry of the Order, and retain each such record for five (5) years.
Specifically, Defendants must create and retain the following records:
A. Accounting records showing the revenues from all goods or services sold to
participants in a Business Venture;
B. Personnel records showing, for each person providing services, whether as an
employee or otherwise, that person’s name; addresses; telephone numbers; job title
or position; dates of service; and (if applicable) the reason for termination;
C. Records accurately reflecting current Preferred Customers’ and Participants’ name,
address, telephone number, and e-mail address, and former Preferred Customers’
and Participants’ name and last known address, telephone number, and e-mail
address;
D. Records of all consumer complaints and refund requests, whether received directly
or indirectly, such as through a third party, and any response;
E. All records necessary to demonstrate full compliance with each provision of this
Order, including all submissions to the Commission;
F. A copy of each unique advertisement or other marketing material used or
disseminated by Defendants to consumers, Preferred Customers, or Participants;
G. A copy of each unique training material used or disseminated by Defendants to
Preferred Customers or Participants; and
H. Copies of all contracts or agreements entered into between Defendants and any
participant in Defendants’ Business Venture.
XII.
COMPLIANCE MONITORING
IT IS FURTHER ORDERED that for the purpose of monitoring Defendants’
compliance with this Order and any failure to transfer any assets as required by this Order:
26
A. Within 14 days of receipt of a written request from a representative of the
Commission each Defendant must: submit additional compliance reports or other
requested information, which must be sworn under penalty of perjury; appear for
depositions; and produce documents for inspection and copying. The Commission
is also authorized to obtain discovery, without further leave of court, using any of
the procedures prescribed by Federal Rules of Civil Procedure 29, 30 (including
telephonic depositions), 31, 33, 34, 36, 45, and 69.
B. For matters concerning this Order, the Commission is authorized to communicate
with each Defendant through its counsel. Defendant must permit representatives of
the Commission to interview any employee or other person affiliated with any
Defendant who has agreed to such an interview. The person interviewed may have
counsel present.
C. The Commission may use all other lawful means, including posing through its
representatives as consumers, suppliers, or other individuals or entities, to
Defendants or any individual or entity affiliated with Defendants, without the
necessity of identification or prior notice. Nothing in this Order limits the
Commission’s lawful use of compulsory process, pursuant to Sections 9 and 20 of
the FTC Act, 15 U.S.C. §§ 49, 57b-1.
XIII.
EFFECTIVE DATE
IT IS FURTHER ORDERED that this Order shall become effective upon entry,
except that Section I shall become effective ten (10) months after entry of the Order.
XIV.
RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for
purposes of construction, modification, and enforcement of this Order.
27
SO STIPULATED AND AGREED:
FOR PLAINTIFF FEDERAL TRADE COMMISSION
/s/ Janet Ammerman
Date: July 15, 2016
JANET AMMERMAN, California Bar No. 113996
Email: jammerman1@ftc.gov
CHRISTINE M. TODARO, OH Bar No. 0084976
Email: ctodaro@ftc.gov
DANIEL O. HANKS, DC Bar No. 495823; VA Bar No. 65523
Email: dhanks@ftc.gov
600 Pennsylvania Ave. NW, Mailstop: CC 8528, Washington, D.C. 20580
Tel: 202-326-3145 (Ammerman)
Tel: 202-326-3711 (Todaro)
Tel: 202-326-2472 (Hanks)
Fax: (202) 326-3395
LAURA SOLIS, WA Bar No. 36005
Email: lsolis@ftc.gov
915 Second Ave., Suite 2896, Seattle, WA 98174
Tel: (206) 220-4544
Fax: (206) 220-6366
Local Counsel
BARBARA CHUN, California Bar No. 186907
Email: bchun@ftc.gov
Federal Trade Commission
10877 Wilshire Blvd., Suite 700
Los Angeles, California 90024
Tel: (310) 824-4312
Fax: (310) 824-4380
FOR DEFENDANTS HERBALIFE INTERNATIONAL OF AMERICA, INC.,
HERBALIFE INTERNATIONAL, INC., AND HERBALIFE, LTD.
/s/ Douglas A. Axel
Date: July 14, 2016
DOUGLAS A. AXEL
Email: daxel@sidley.com
NITIN REDDY
Email: nreddy@sidley.com
Sidley Austin LLP
555 West Fifth Street
Los Angeles, CA 90013
Tel: (213) 896-6035 (Axel)
Tel: (213) 896-6929 (Reddy)
Fax: (213) 896-6600
28
ANDREW J. STRENIO, JR.
Email: astrenio@sidley.com
Sidley Austin LLP
1501 K Street NW
Washington, DC 20005
Tel: (202) 736-8614
Fax: (202) 736-8711
/s/ John E. Villafranco
Date: July 14, 2016
JOHN E. VILLAFRANCO
Email: jvillafranco@kelleydrye.com
Kelley Drye & Warren LLP
3050 K Street NW
Washington, DC 20007
Tel: (202) 342-8400
Fax: (202) 342-8451
/s/ JB Kelly
July 14, 2016
JB KELLY
Email: jbkelly@cozen.com
Cozen O’Connor
1200 19th Street NW, 3rd Floor
Washington, DC 20036
Tel: (202) 471-3418
Fax: (202) 861-1905
FOR DEFENDANTS HERBALIFE INTERNATIONAL OF AMERICA, INC. ,
HERBALIFE INTERNATIONAL, INC. , AND HERBALIFE, LTD.
/s/ Mark J. Friedman
Date: July 14, 2016
MARK J. FRIEDMAN, as an officer of
Herbalife International of America, Inc.
/s/ Mark J. Friedman
Date: July 14, 2016
MARK J. FRIEDMAN, as an officer of
Herbalife International, Inc.
/s/ Mark J. Friedman
Date: July 14, 2016
MARK J. FRIEDMAN, as an officer of
Herbalife, Ltd.
29
Exhibit 10.2
July 15, 2016
Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, New York 10153
Attention: Keith Cozza
Re: Second Amended and Restated Support Agreement
Ladies and Gentlemen:
This second amended and restated support agreement (this “ Agreement ”) amends and restates that certain amended and restated support agreement (the “ 2014 Agreement ”) entered into between Herbalife Ltd., a Cayman Islands corporation (the “ Company ”), Carl C. Icahn and certain affiliated entities of Mr. Icahn, dated March 23, 2014, which amended and restated that certain support agreement (the “ Original Agreement ”) entered into between the Company, Mr. Icahn and certain affiliated entities of Mr. Icahn dated February 28, 2013. This Agreement sets forth our understanding and agreement with respect to your investment in and representation on the Board of Directors of the Company (the “ Board ”) and certain restrictions and limitations to be placed on Mr. Icahn, Icahn Partners Master Fund LP, Icahn Offshore LP, Icahn Partners LP, Icahn Onshore LP, Beckton Corp., Hopper Investments LLC, Barberry Corp., High River Limited Partnership, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings L.P., and Icahn Enterprises G.P. Inc. (collectively with you, the “ Icahn Parties ”). Pursuant to and in accordance with the terms and conditions of the Original Agreement, the Icahn Parties designated, and the Company nominated, two designees of the Icahn Parties to the Board (the “ 2013 Icahn Designees ”), both of whom were elected to the Board at the 2013 annual general meeting of shareholders on April 25, 2013. Pursuant to and in accordance with the terms and conditions of the 2014 Agreement, the Icahn Parties designated, and the Company nominated, two additional designees of the Icahn Parties to the Board (the “ 2014 Icahn Designees ” and, together with the 2013 Icahn Designees, the “ Icahn Designees ”), and an independent director (the “ Independent Designee ”), each of whom was elected to the Board at the 2014 annual general meeting of shareholders on April 29, 2014. The Icahn Designees and the Independent Designee have each subsequently been nominated for re-election to the Board, and most recently at the Company’s 2016 annual general meeting of shareholders, have each been re-elected to the Board.
In consideration of and reliance upon the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledge, by signing this Agreement, the parties agree and acknowledge as follows:
1.
Board Matters & Voting .
(a) In consideration of the Icahn Parties’ agreement set forth in this Agreement, the Company shall nominate each Icahn Designee and the Independent Designee (collectively, the “ 2017 Board Nominees ”) for election to the Board at the 2017 annual general meeting of shareholders (the “ 2017 Annual Meeting ”).
The Company shall include the 2017 Board Nominees in the Company’s slate of nominees for election as directors of the Company at the 2017 Annual Meeting and shall use commercially reasonable efforts to cause the election of the 2017 Board Nominees to the Board at the 2017 Annual Meeting (including recommending that the Company’s shareholders vote in favor of the election of the 2017 Board Nominees, including such nominees in the Company’s proxy statement for the 2017 Annual Meeting and otherwise supporting such nominees for election in a manner no less rigorous and favorable than the manner in which the Company supports its other nominees in the aggregate). The Icahn Parties, the Icahn Designees and the Independent Director shall provide the Company with such information with respect to
the Icahn Parties, the Icahn Designees and the Independent Director as is required to be included in the proxy statement under applicable law.
If any of the 2017 Board Nominees resigns from the Board or is rendered unable to, or refuses to, be appointed to, or to serve on, the Board, the Icahn Parties shall be entitled to designate a replacement for each such designee that is approved by the Company’s Nominating and Corporate Governance Committee (such approval not to be unreasonably withheld or delayed) for each such designee (and if such proposed designee is not approved by such committee, the Icahn Parties shall be entitled to continue designating a replacement until such proposed designee is approved by the Company and such committee) (a “ Replacement ”), and the Company shall take all necessary action to promptly appoint such person to the Board. Any Replacement pursuant to this Agreement shall be deemed to be an Icahn Designee or Independent Director, as applicable, for all purposes under this Agreement and prior to his or her appointment to the Board, shall be required to, and the Icahn Parties shall cause such person to, execute the resignation as director in the form attached hereto as Exhibit A and deliver it to the Company. For the avoidance of doubt, any Replacement of the Independent Director pursuant to this Agreement shall (A) except as permitted by the Company, not be a director, officer, employee or consultant of, advisor to, affiliated with or receive compensation from (including, without limitation, in connection with service on the Board) any of the Icahn Parties, and (B) be otherwise independent within the meaning of the rules and regulations of the New York Stock Exchange and the Company’s independence guidelines, as determined in good faith by the Board.
The Company acknowledges and agrees that any policy of the Company or of the Board, whether formal or informal, in existence as of the date hereof or subsequently adopted, including without limitation, any Insider Trading Policy, shall only be applicable to the Icahn Designees and the Independent Director and in no event shall any such policies have any applicability with respect to any Icahn Party or any of their Affiliates.
(b) As of the date hereof, the Company represents and warrants that the Board is composed of thirteen (13) directors and that there are no vacancies on the Board. The Company agrees that it will not, from and after the date hereof, take any action, or support any Person (as defined below) who is seeking, to increase the size of the Board above fifteen (15) directors, each having one vote on all matters; provided that the Company further agrees that, from and after the date hereof, and following the 2017 Annual Meeting, for so long as an Icahn Designee is a member of the Board or the Icahn Parties are in the process of identifying a Replacement as permitted under the third paragraph of Section 1(a), if the Company or the Board increases the size of the Board to greater than thirteen (13) directors, then, for so long as the size of the Board is greater than thirteen (13) directors, the Icahn Parties shall have the right to designate additional persons approved by the Company and reasonably acceptable to the Nominating and Corporate Governance Committee (such approval not to be unreasonably withheld or delayed) as directors (and if such proposed designee is not approved by such committee, the Icahn Parties shall be entitled to continue designating a Replacement) to fill all such directorships and the Company shall take all necessary action to promptly appoint such person to the Board. Any such person shall be deemed to be an Icahn Designee for all purposes under this Agreement and prior to his or her appointment to the Board, shall be required to, and the Icahn Parties shall cause such person to, execute the resignation as director in the form attached hereto as Exhibit A and deliver it to the Company.
(c) For any annual general meeting of Company shareholders subsequent to the 2017 Annual Meeting but only for so long as an Icahn Designee is a member of the Board or the Icahn Parties are in the process of identifying a Replacement as permitted under the third paragraph of Section 1(a), the Company agrees to notify the Icahn Parties between the January 5th and 15th immediately preceding such annual general meeting (which such date of notification shall in no event be less than 20 calendar days before the advance notice deadline (the “ Advance Notice Deadline ”) set forth in Sections 73 to 76 of the Company’s Amended and Restated Memorandum and Articles of Association (as may be amended, the “ Memorandum and Articles ”), as such date may change from time to time) whether or not any Icahn Designee or the Independent Director whose term of office is expiring at such annual general meeting
2
(such notice, the “ Company Notice ”) will be nominated by the Company for election as a director at such annual general meeting and, if any Icahn Designee or the Independent Director will be nominated, to use commercially reasonable efforts to cause the election of any such nominees so nominated by the Company (including recommending that the Company’s shareholders vote in favor of the election of any such nominees, including such nominees in the Company’s proxy statement for such annual general meeting and otherwise supporting any such nominee for election in a manner no less rigorous and favorable than the manner in which the Company supports its other nominees in the aggregate). In the event that the Company notifies the Icahn Parties that any Icahn Designee or the Independent Director will not be nominated by the Company for election as a director pursuant to the preceding sentence or if within ten (10) days of the Company Notice the Icahn Designees or the Independent Director resign from the Board, then Company agrees that the Advance Notice Deadline for the upcoming annual meeting, will not be prior to March 15th of the applicable year and that the Company shall set the date of such annual general meeting so that such Advance Notice Deadline will comply with this sentence. The Company agrees that the Advance Notice Deadline for the 2017 Annual Meeting will not be prior to March 15, 2017, and that the Company shall set the date of the 2017 Annual Meeting so that such Advance Notice Deadline will comply with this sentence.
(d) For so long as an Icahn Designee is a member of the Board or the Icahn Parties are in the process of identifying a Replacement as permitted under the third paragraph of Section 1(a), the Company and the Icahn Parties agree that the Board shall not (i) create any new committee; provided that nothing in this Section 1(d) or elsewhere in this Agreement shall prohibit the Company or the Board from creating a committee that does not include any Icahn Designees to consider specific matters that include conflicts of interest between the Company and the Icahn Parties if it would be prudent as a matter of law to exclude the Icahn Designees from membership on such committee, or (ii) expand the scope of duties and responsibilities of any of the three existing committees of the Board (namely, the audit committee, the compensation committee and the nominating and corporate governance committee), except to the extent required by applicable law, stock exchange or other regulatory requirement.
(e) Notwithstanding anything to the contrary in this Agreement: (i) the rights and privileges set forth in this Agreement shall be personal to the Icahn Parties and may not be transferred or assigned to any individual, corporation, partnership, limited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature (each, a “ Person ”), except that the Icahn Parties shall be permitted to transfer or assign this Agreement to their controlled Affiliates and (ii) if at any time after the date hereof, the Icahn Parties (together with their controlled Affiliates) cease collectively to Beneficially Own, at least 7,007,575 Company common shares, as adjusted to account for any stock split, stock dividend or similar corporate action, (y) the Icahn Parties shall cause the Icahn Designees to promptly tender their resignations from the Board and any committee of the Board on which they may be a member and (z) except as set forth in Sections 2 and 12, the Company and the Icahn Parties shall have no further obligations under this Agreement. In furtherance of the foregoing, each Icahn Designee shall, prior to his or her appointment to the Board, and each member of the Icahn Parties shall cause each such Icahn Designee to, execute an irrevocable resignation as director in the form attached hereto as Exhibit A and deliver it to the Company. For purposes of this Agreement: (I) the term “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission (“ SEC ”) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and (II) the term “Beneficially Own” or variations thereof shall have the meaning set forth in Rules 13d-3 and 13d-5 promulgated under the Exchange Act, except that a person or group shall be deemed to have “Beneficial Ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time.
(f) The Company hereby agrees that no later than two (2) business days after the Company receives a written request from the Icahn Parties, the Company shall provide to the Icahn Parties that number of shares used to calculate the denominator in the “Change of Control” threshold under the Company’s Amended and Restated Credit Agreement, dated as of July 26, 2012 (as amended from time to time, the “Credit Agreement”). As of July 13, 2016, the Company represents that such number was 97,444,789 common shares. The Icahn Parties hereby agree that no later than two (2) business days after receipt of a
3
written request from the Company, the Icahn Parties shall provide to the Company that number of shares used to calculate the numerator in the calculation of the 34.99% threshold under Section 2(a) below.
2.
Standstill Agreement .
In consideration of the Company’s agreement set forth herein, so long as the Company has complied and is complying with its obligations under the first and second paragraphs of Section 1(a), Sections 1(b), 1(c) and 1(d), and Section 6, and has otherwise materially complied and is materially complying with its other obligations set forth in this Agreement, the Icahn Parties agree that, from the date hereof until the later to occur of (i) the first date after the date hereof on which no Icahn Designee is a member of the Board and (ii) the earlier of (x) the completion of the 2017 Annual Meeting and (y) May 31, 2017, the Icahn Parties shall not, and shall cause their respective directors, officers, partners, members, employees, agents (acting in such capacity) and controlled Affiliates (collectively, “ Representatives ”) not to, directly or indirectly, without the prior written consent of either the Chief Executive Officer or the Board (which prior written consent of the Board shall require the approval of a majority of the members of the Board who are not 2017 Board Nominees or a Replacement):
(a) except in connection with a Competing Offer (as defined below), acquire, seek to acquire or agree to acquire (whether by market purchases, private purchases or otherwise) any common shares of the Company (or Beneficial Ownership thereof) or any securities convertible or exchangeable into or exercisable for any common shares of the Company (or Beneficial Ownership thereof) (including any derivative securities or instruments having the right to acquire common shares of the Company) if after the consummation of any such acquisition, the Icahn Parties would Beneficially Own more than 34.99% of the Company’s then outstanding common shares or voting power of the Company in the aggregate, other than securities issued pursuant to a stock split, stock dividend or similar corporate action initiated by the Company or taken by the Company’s shareholders with respect to any securities Beneficially Owned by the Icahn Parties; provided that if the Icahn Parties, at any time, Beneficially Own more than 34.99% of the Company’s then outstanding common shares or voting power of the Company in the aggregate, due solely to a reduction in the outstanding common shares of the Company (whether or not the Icahn Parties were aware of such a reduction in the outstanding common shares of the Company), the Icahn Parties shall not have, and shall not be deemed to have, violated this clause (a); it being understood that for purposes of this Section 2(a), the 34.99% shall be calculated using the number of the Company’s outstanding common shares as most recently disclosed by the Company in a Form 10-K, Form 10-Q or Form 8-K, as filed with the SEC.
(b) (A) other than in connection with a Permitted Opposition (as defined below), encourage, advise or influence any other Person or assist any third party in so encouraging, assisting or influencing any other Person with respect to the giving or withholding of any proxy, consent or other authority to vote or in conducting any type of referendum (other than such encouragement, advice or influence that is consistent with Company management’s recommendation in connection with such matter) or (B) advise, influence or encourage any Person (other than the Icahn Parties and their Representatives) or effect or seek to effect, whether alone or in concert with others, the election or nomination of a director other than as permitted in this Agreement or (C) advise, influence or encourage any Person, other than the Icahn Parties and their Representatives, to commence a tender offer; provided, however, that neither this clause (b) nor any other provision in this Agreement shall restrict or otherwise limit the Icahn Parties’ from being able to vote any voting securities of the Company in favor of or against any proposal, action or transaction; provided, further, that in the event of a third party tender or exchange offer for securities of the Company that has been commenced and not withdrawn by a Person other than the Icahn Parties or any Affiliate of an Icahn Party (a “ Third Party Offer ”), the Icahn Parties shall be permitted to commence, and if successful, consummate, a competing tender or exchange offer for any and all of the outstanding voting securities of the Company that would, if consummated, result in the Icahn Parties owning at least a majority of the then outstanding common shares or voting power of the Company in the aggregate, which tender offer will be conditioned on such purchases in the tender offer, when added to number of common
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shares Beneficially Owned by the Icahn Parties’ immediately prior to the tender offer, equaling at least such majority of common shares (a “ Competing Offer ”);
(c) other than in connection with a Permitted Opposition, solicit proxies or written consents of shareholders or conduct any other type of referendum (binding or non-binding) with respect to the common shares of the Company, or from the holders of the common shares of the Company, or become a “participant” (as such term is defined in Instruction 3 to Item 4 of Schedule 14A promulgated under the Exchange Act) in or assist any third party in any “solicitation” of any proxy, consent or other authority (as such terms are defined under the Exchange Act) to vote any common shares of the Company (other than any encouragement, advice or influence that is consistent with Company management’s recommendation in connection with such matter); provided that except as expressly agreed in Section 3, the Icahn Parties shall not be restricted from voting any common shares of the Company in favor of or against any proposal or other action for which such solicitation is being made;
(d) form or join in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act), for the avoidance of doubt, other than a group comprised solely of the Icahn Parties and their controlled Affiliates, with respect to any common shares of the Company or agree to or deposit any common shares of the Company or any securities convertible or exchangeable into or exercisable for any such common shares in any voting trust or similar arrangement (other than to the named proxies included in the Company’s proxy card for any annual general meeting);
(e)
seek to have the Company waive, amend or modify any provisions of the Memorandum and Articles;
(f) encourage or facilitate the taking of any actions by any other Person in connection with the foregoing that is prohibited to be taken by the Icahn Parties; or
(g) publicly request that the Company or any Representative of the Company, directly or indirectly, amend or waive any provision of this Section 2 (including this clause (g));
provided, that nothing in this Agreement shall limit or in any way apply to any actions or communications that may be taken by an Icahn Designee as a director of the Company.
Nothing in this Section 2 or any other provision in this Agreement shall prohibit, be deemed to prohibit or otherwise restrict the Icahn Parties from (1) commencing, and if successful, consummating a Competing Offer, or (2) in order to allow new directors designated by the Icahn Parties to satisfy any conditions included in such Competing Offer, (x) soliciting proxies, (y) seeking to replace any member or members of the Board or (z) seeking to amend or modify the Memorandum and Articles; provided, in the case of clause (2), such action or actions having substantially the same or a similar purpose or effect, have also been taken, or have been proposed to be taken, by the Person commencing the Third Party Offer.
For purposes of this Agreement, “ Permitted Opposition ” means any opposition undertaken by the Icahn Parties to defeat any matter submitted to a meeting of shareholders including any matter to be proposed at an annual general meeting, other than the election of directors, appointment of auditors, approval of “say-on-pay”, or other similar matters typically proposed at an annual general meeting in the ordinary course of business; provided, however, in connection with a Permitted Opposition the Icahn Parties shall not, and shall cause their respective Representatives not to, directly or indirectly, furnish or cause to be furnished to any other shareholder of the Company a form of proxy.
3.
Voting; Quorum .
So long as the Company has complied and is complying with its obligations under the first and second paragraphs of Section 1(a), Sections 1(b), 1(c) and 1(d), and Section 6, and has otherwise materially complied and is materially complying with its other obligations set forth in this Agreement, in connection with the 2017 Annual Meeting, and, thereafter, for so long as an Icahn Designee is a member of the Board, the Icahn Parties shall (1) cause, in the case of all common shares of the Company owned of
5
record, and (2) instruct the record owner, in the case of all common shares of the Company Beneficially Owned but not owned of record, directly or indirectly, by it, as of the record date for the 2017 Annual Meeting and all future meetings of shareholders (whether annual or special and whether by vote or by written consent) at which directors are elected, in each case that are entitled to vote at the 2017 Annual Meeting and all such future meetings, to be present for quorum purposes and to be voted, at the 2017 Annual Meeting and all such future meetings or at any adjournments or postponements thereof, (i) for all directors nominated by the Board for election at all such meetings and (ii) in accordance with the recommendation of the Board for the ratification of the appointment of the Company’s independent public accounting firm set forth in the Company’s proxy statement for such meetings; provided that the Icahn Parties obligations set forth in this Section 3 shall terminate if the 2017 Annual Meeting is not held on or prior to May 31, 2017.
4.
Communications .
Until three (3) months after the date on which no Icahn Designee is a member of the Board, (a) neither the Icahn Parties nor any of the Icahn Parties’ Representatives shall make, or cause to be made, by press release or similar public statement to the press or media, any statement or announcement that constitutes an ad hominem attack on, or otherwise disparages (as distinct from objective statements reflecting business criticism), the Company, its officers or its directors or any person who has served as an officer or director of the Company in the past and (b) the Company shall not, and shall cause its directors and officers not to, make, or cause to be made, by press release or similar public statement to the press or media, any statement or announcement that constitutes an ad hominem attack on, or otherwise disparages (as distinct from objective statements reflecting business criticism), any Icahn Party, its officers or its directors or any person who has served as an officer or director of any Icahn Party in the past). The foregoing shall not prevent the making of any factual statement including in any compelled testimony or production of information, either by legal process, subpoena, or as part of a response to a request for information from any governmental authority with purported jurisdiction over the party from whom information is sought.
5.
Public Announcements .
The Company shall announce this Agreement and the material terms hereof by means of a press release substantially in the form of Exhibit B . The Company shall provide a draft copy of the Form 8-K relating to this Agreement to the Icahn Parties at least two hours prior to filing with the SEC. The Company acknowledges that the Icahn Parties will comply with their obligations under Section 13(d) of the Exchange Act and intend to file this Agreement as an exhibit to an amendment to its Schedule 13D. The Icahn Parties will provide a draft copy of such Schedule 13D/A to the Company at least two hours prior to filing with the SEC.
6.
Board Resolutions; Article 109; Rights Plan.
(a) The Company hereby represents and warrants that the Board has previously adopted the resolutions in the form attached as Exhibit C (the “ Resolutions ”) and as of the date hereof, the Resolutions are in full force and effect. The Company and the Board agree that the Resolutions are irrevocable and that at no time, regardless of whether this Agreement has been terminated or whether the Company or the Icahn Parties have breached any of their obligations under this Agreement, shall the Company or the Board amend, revoke, rescind or otherwise modify the Resolutions. The Company and the Board agree that this Section 6(a), and the Icahn Parties right to enforce the Resolutions, shall survive any termination of this Agreement regardless of the cause for termination. Pursuant to the provisions of Article 109 of the Memorandum and Articles, the Board grants its irrevocable consent to the consummation by the Icahn Parties or any of them of a transaction or series of transactions, of whatever nature, pursuant to which the Icahn Parties or any of them will become an Interested Member (as defined in the Memorandum and Articles) by acquiring the Company’s outstanding common shares (or securities or other instruments convertible into or exchangeable for such shares).
6
(b) The Company and the Board reserve the right to adopt at any time any “Rights Plan” (which term shall include a plan or arrangement commonly referred to as a “rights plan” or “stockholder rights plan” or “shareholder rights plan” or “poison pill”), provided, however, in the event the Company adopts a Rights Plan, it agrees that for so long as an Icahn Designee is a member of the Board (i) such Rights Plan will be designed so it does not prevent or otherwise frustrate the purchase of common shares of the Company by the Icahn Parties to the extent expressly permitted by Section 2(a) of this Agreement and (ii) if the Company shall waive, modify or amend any term of such Rights Plan with respect to any third party, or if such Rights Plan shall include any provision that is more advantageous or favorable with respect to any Person or type of Person than it is to the Icahn Parties, then such waiver, modification, amendment, or provision shall also apply to the Icahn Parties.
(c) The Company and the Board acknowledge that the Icahn Parties have entered into this Agreement in reliance upon this Section 6 and that the Icahn Parties have not conceded the enforceability of any Rights Plan.
7.
Confidentiality Agreement.
The Company hereby agrees that the Icahn Designees are permitted to and may provide confidential information in accordance with the terms of the confidentiality agreement executed in connection with the execution of the 2014 Agreement (the “ Confidentiality Agreement ”) and that the Confidentiality Agreement remains in full force and effect. The parties hereto also agree that for purposes of the Confidentiality Agreement, any reference therein to the “Letter Agreement” shall hereinafter refer to this Agreement and not the 2014 Agreement and any notices delivered under the Confidentiality Agreement shall be provided to the addressees set forth in Section 11 hereof.
8.
Representations and Warranties of the Company.
The Company represents and warrants to the Icahn Parties that (a) the Company has the corporate power and authority to execute this Agreement and to bind it thereto, (b) this Agreement has been duly and validly authorized, executed and delivered by the Company, constitutes a valid and binding obligation and agreement of the Company, and is enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles and (c) the execution, delivery and performance of this Agreement by the Company does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to it or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document, agreement, contract, commitment, understanding or arrangement to which the Company is a party or by which it is bound.
9.
Representations and Warranties of the Icahn Parties.
(a) Each Icahn Party represents and warrants to the Company that (i) the authorized signatories of such Icahn Party set forth on the signature page hereto have the power and authority to execute this Agreement and to bind applicable Icahn Party to this Agreement, (ii) this Agreement has been duly authorized, executed and delivered by each Icahn Party, and is a valid and binding obligation of each Icahn Party, enforceable against such Icahn Party in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles and (iii) the execution, delivery and performance of this Agreement by such Icahn Party does not and will not violate or conflict with (A) any law, rule, regulation, order, judgment or decree applicable to it or (B) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document,
7
agreement, contract, commitment, understanding or arrangement to which such Icahn Party is a party or by which it is bound.
(b) Each Icahn Party shall cause its controlled Affiliates and Representatives to comply with the terms of this Agreement.
10.
Securities Laws.
The Icahn Parties acknowledge that the Icahn Parties are aware and that the Icahn Parties and the Icahn Parties’ Representatives have been advised that the United States securities laws prohibit any Person having non-public material information about a company from purchasing or selling securities of that company in violation of applicable law. Notwithstanding anything set forth herein to the contrary, nothing in this Agreement shall be interpreted in such a manner as to require an Icahn Party or the Company to violate the United States securities laws.
11.
Notices.
Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed given when delivered (i) by email and (ii) in person, by overnight courier, by email, by facsimile transmission (with receipt confirmed by telephone, by email receipt notice or by automatic transmission report) as follows:
If to the Company, to:
Herbalife Ltd.
800 West Olympic Boulevard, Suite 406
Los Angeles, California 90015
Attention: General Counsel
Facsimile: (213) 765-9890
Email: markf@herbalife.com
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, CA 90067
Attention: Jonathan K. Layne
Facsimile: (310) 552-7053
Email: JLayne@gibsondunn.com
and
Morgan, Lewis & Bockius LLP
300 South Grand Ave., 22nd Floor
Los Angeles, CA 90071
Attention: John F. Hartigan
Facsimile: (213) 612-2501
Email: jhartigan@morganlewis.com
If to the Icahn Parties, to:
Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, New York 10153
Attention: Keith Cozza
8
Facsimile: (212) 688-1158
Email: kcozza@sfire.com
with a copy (which shall not constitute notice) to:
Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, New York 10153
Attention: Andrew Langham
Facsimile: (212) 688-1158
Email: alangham@sfire.com
Any party may, by notice given in accordance with this paragraph to the other parties, designate updated information for notices hereunder.
12.
Termination; Survival.
If (a) the Company fails to comply with its obligations in Section 1, or (b) the Company or the Board breach or take any action inconsistent with the Company and the Board’s obligations pursuant to Section 6 or otherwise is in material breach, then, at the election of the Icahn Parties, in each case, this Agreement shall terminate. In the event of a termination of this Agreement for any reason, including pursuant to Section 1(e), (x) Sections 6, 16 and 18 shall survive indefinitely, (y) Section 2 shall survive (in accordance with its terms) until the later to occur of (i) the first date after the date hereof on which no Icahn Designee is a member of the Board and (ii) the earlier of (x) the completion of the 2017 Annual Meeting and (y) May 31, 2017, and (z) Section 4 shall survive until three (3) months after the date on which no Icahn Designee is a member of the Board.
13.
Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties named herein and their respective successors and permitted assigns. No party may assign or otherwise transfer either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties; provided, however, that the Icahn Parties may assign this Agreement as set forth in Section 1(e). Any purported transfer requiring consent without such consent shall be void. No amendment, modification, supplement or waiver of any provision of this Agreement shall be effective unless it is in writing and signed by the party or parties hereto affected thereby, and then only in the specific instance and for the specific purpose stated therein. Any waiver by any party hereto of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party hereto to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. This Agreement constitutes the only agreement between the Icahn Parties and the Company with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written.
14.
Third Party Beneficiaries.
This Agreement is solely for the benefit of the parties hereto and is not enforceable by any other Persons.
15.
Entire Agreement; Amendments.
This Agreement (including the exhibits hereto) represents the entire understanding and agreement of the parties with respect to the matters contained herein, and may be amended, modified or waived only by a separate writing executed by the Icahn Parties and the Company expressly so amending, modifying or
9
waiving this Agreement. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns.
16.
Specific Performance.
The parties recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, each party agrees that in addition to other remedies the other party shall be entitled to an injunction without posting a bond or other undertaking restraining any violation or threatened violation of the provisions of this Agreement. In the event that any action shall be brought in equity to enforce the provisions of the Agreement, no party shall allege, and each party hereby waives the defense, that there is an adequate remedy at law.
17.
No Waiver.
No failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder.
18.
Governing Law.
Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the Court of Chancery or other federal or state courts of the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the Court of Chancery or other federal or state courts of the State of Delaware, and each of the parties irrevocably waives the right to trial by jury, (d) agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief, and (e) irrevocably consents to service of process by a reputable overnight delivery service, signature requested, to the address of such party’s principal place of business or as otherwise provided by applicable law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING WITHOUT LIMITATION VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.
19.
Expenses.
In the event of litigation or any other dispute arising under or in connection with this Agreement, each party shall pay its own costs and expenses.
20.
Captions.
The Captions contained in this Agreement are for convenience only and shall not affect the construction or interpretation of any provisions of this Agreement.
21.
Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same Agreement.
[Remainder of Page Intentionally Left Blank]
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Please confirm your agreement with the foregoing by signing and return to us a copy of this Agreement.
HERBALIFE LTD.
By: /s/ Mark J. Friedman
Name: Mark J. Friedman
Title: Executive Vice President, General Counsel
Agreed to and accepted as of the date first written above:
ICAHN ASSOCIATES CORP.
ICAHN PARTNERS MASTER FUND LP
ICAHN OFFSHORE LP
ICAHN PARTNERS LP
ICAHN ONSHORE LP
BECKTON CORP.
HOPPER INVESTMENTS LLC
By: Barberry Corp., its sole member
BARBERRY CORP.
HIGH RIVER LIMITED PARTNERSHIP
By: Hopper Investments LLC, general partner
By: Barberry Corp., its sole member
By: /s/ Sung Hwan Cho
Name: Sung Hwan Cho
Title: Authorized Signatory
ICAHN CAPITAL LP
By: IPH GP LLC, its general partner
By: Icahn Enterprises Holdings L.P., its sole member
By: Icahn Enterprises G.P. Inc., its general partner
IPH GP LLC
By: Icahn Enterprises Holdings L.P., its sole member
By: Icahn Enterprises G.P. Inc., its general partner
ICAHN ENTERPRISES HOLDINGS L.P.
By: Icahn Enterprises G.P. Inc., its general partner
ICAHN ENTERPRISES G.P. INC.
By: /s/ Sung Hwan Cho
Name: Sung Hwan Cho
Title: Chief Financial Officer
/s/ Carl C. Icahn
Carl C. Icahn
11
Exhibit A
Resignation
[Date]
Board of Directors
Herbalife Ltd.
800 West Olympic Boulevard, Suite 406
Los Angeles, California 90015
Re: Resignation
Ladies and Gentlemen:
This irrevocable resignation is delivered pursuant to that certain Second Amended and Restated Support Agreement, effective as of July 15, 2016, between Herbalife Ltd. and certain members of the Icahn Parties signatory thereto (the “ Agreement ”). Capitalized terms used herein but not defined shall have the meaning set forth in the Agreement. Effective only upon, and subject to, [the earlier of (i)] such time as the Icahn Parties (together with their Affiliates) ceases collectively to Beneficially Own at least 7,007,575 Company common shares, as adjusted to account for any stock split, stock dividend or similar corporate action [or (ii) such time as the Board is composed of thirteen (13) or fewer directors] 1 , I hereby irrevocably resign from my position as a director of the Company and from any and all committees of the Board on which I serve.
Sincerely,
Name:
1 To be inserted only for an additional Icahn Designee appointed pursuant to Section 1(b), if any.
12
Exhibit B
Press Release
[See Exhibit 99.2 to Herbalife Ltd.’s Current Report on Form 8-K filed on July 15, 2016]
13
Exhibit C
Board Resolutions
1.1 Background
The Chairman noted that the meeting had been convened in order to consider acquisitions by Icahn Partners Master Fund LP, Icahn Offshore LP, Icahn Partners LP, Icahn Onshore LP, Beckton Corp., Hopper Investments LLC, Barberry Corp., High River Limited Partnership, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings L.P., Icahn Enterprises G.P. Inc. and their respective affiliates (collectively, the “ Icahn Parties ”) of additional Voting Shares (as defined in the Company’s Articles of Association) of the Company’s common shares (the “Voting Shares”) (or securities or other instruments convertible into or exchangeable for such shares, including options, swaps or derivative securities (all of the foregoing, together with Voting Shares, the “Securities”)). The Icahn Parties “own” (as defined in the Articles) approximately 17 million common shares of the Company and desire to purchase additional Securities.
It was noted that the Articles provide, at Article 109, that the Company shall not engage in any Business Combination with any Interested Member for a period of three (3) years following the date that such Member became an Interested Member, unless prior to such date the Board approves either the Business Combination or the transaction which resulted in the Member becoming an Interested Member (each capitalised term as defined in the Articles).
1.2 Approved Transactions
It was proposed to provide the approval of the Board required by the provisions of Article 109 to the consummation by the Icahn Parties or any of them of a transaction or series of transactions, of whatever nature, pursuant to which the Icahn Parties or any of them will become an Interested Member by purchasing Securities (in market purchases, private transactions or any other purchase or acquisition (each such purchase or acquisition, a “ Purchase ”) and thereby become the owner of 15% or more of the outstanding Voting Shares (each such Purchase, an “Approved Transaction”).
Upon motion duly made, seconded and carried unanimously, IT WAS RESOLVED that, it being in the best interests of the Company, each Approved Transactions be and hereby is, approved.
14
Exhibit 99.1
HERBALIFE AND THE FEDERAL TRADE COMMISSION REACH SETTLEMENT AGREEMENT
Settlement Does Not Change Herbalife’s Business Model as a Direct Selling Company
Herbalife Board of Directors Frees Carl Icahn to
Acquire Up to 34.99% of the Company’s Outstanding Common Shares
LOS ANGELES – July 15, 2016 -- Global nutrition company Herbalife Ltd. (NYSE: HLF) (“Herbalife” or “the Company”) announced it has reached a settlement agreement with the Federal Trade Commission (“FTC” or the “Commission”) resolving the FTC’s multi-year investigation of the Company. The terms of the settlement do not change Herbalife’s business model as a direct selling company and set new standards for the industry. With the settlement agreement announced today, the FTC’s investigation of Herbalife is complete.
Herbalife and the Illinois Attorney General also reached a settlement, and the Company agreed to pay $3 million as part of this separate agreement. With the conclusion of the Illinois investigation, the Company is not aware of any active investigations by any other state attorney general.
“The settlements are an acknowledgment that our business model is sound and underscore our confidence in our ability to move forward successfully, otherwise we would not have agreed to the terms,” stated Michael O. Johnson, chairman and CEO, Herbalife.
While the Company believes that many of the allegations made by the FTC are factually incorrect, the Company believes settlement is in its best interest because the financial cost and distraction of protracted litigation would have been significant, and after more than two years of cooperating with the FTC’s investigation, the Company simply wanted to move forward. Moreover, the Company’s management can now focus all of its energies on continuing to build the business and exploring strategic business opportunities.
The Company’s Board of Directors (“Board”) unanimously approved the settlements and voluntarily established an Oversight Committee of the Board (“Committee”) that will ensure full compliance with the terms of the agreement. The Board also appointed Jonathan Leibowitz, partner in the law firm of Davis, Polk and Wardell, and former Chairman of the Federal Trade Commission, as a Senior Advisor to the Board. Mr. Leibowitz will be responsible for advising the Committee about implementation and compliance matters relating to the settlement. The Board also appointed Henry Wang, presently Deputy General Counsel and Chief Compliance Officer, to lead the Company’s implementation efforts, reporting directly to the Committee on these matters. Additionally, Pamela Jones Harbour, currently Senior Vice President of Global Member Practices and Compliance and former FTC Commissioner, was appointed to oversee implementation of new distributor compliance initiatives.
The Oversight Committee complements the Board’s ongoing commitment to lead the industry while continuously improving customer protections and satisfaction. During the past few years, the Board has engaged experts in the field of consumer protection to advise them on regulatory compliance and best practices leading to many of the enhanced safeguards that were previously implemented and are being expanded in today’s agreement.
The terms of the settlement apply only to the Company’s sales in the U.S., which comprise approximately 20% of total net sales. As part of the settlement, the Company agreed to new procedures and enhancements to some policies that already exist. Many of the terms agreed to were either already being contemplated by the Company or are extensions of practices already in place and will be implemented over the next 10 months. The two primary components of the agreement are:
1. Those who currently have a membership with Herbalife, and those coming into the business, will be categorized as either a preferred member (those who become a preferred member to purchase products at a discount) or distributor (those who choose to build a business and sell products through direct sales). This will allow Herbalife to better track both groups and provide a personalized experience for these individuals.
2. Distributors will be compensated based upon retail sales and will provide receipts for their transactions. Their compensation will also be based on purchase for personal consumption within allowable limits. Herbalife’s independent distributors are currently required to keep sales transaction receipts. With advancements in mobile technology, tracking retail sales is now even easier, and the Company has already developed proprietary technological solutions including a mobile application in the U.S. to make the process as efficient and easy as possible.
Other terms agreed to include enhancing training provided to distributors; requiring a business plan and a one-year waiting period before opening a nutrition club; extending the amount of time a distributor may return an initial membership pack; paying for all shipping costs associated with any returned products; prohibiting auto-shipment of products; auditing by an independent third party; and extending the protections on income claims including greater specificity around lifestyle claims.
Importantly, as was the case with the FTC’s Amway decision in 1979 ( In the Matter of Amway Corporation Inc., et. al.) , the Company anticipates these agreed upon procedures will now provide direction for the entire direct selling and multi-level marketing industry. Therefore, the Company believes that while some of the additional terms do not have significant impact on the Company, these provisions will improve policies throughout the industry. For example, the Company implemented stricter consumer protection rules relating to auto-ship several years ago and the practice now represents less than 1% of all Company sales. Similarly, only 0.02% of all Herbalife products in the United States are returned to the Company, so paying shipping costs associated with returned orders is expected to have minimal impact. While the costs associated with these respective changes are expected to be immaterial to Herbalife, they will likely lead to significant changes across the industry.
Furthermore, as previously referenced in the Company’s public disclosure on May 5, 2016, Herbalife also agreed to make a $200 million payment to the FTC as part of the settlement.
The Company additionally announced that it has granted Carl C. Icahn, Icahn Enterprises Holdings L.P. and certain related entities (collectively the “Icahn Parties”) the right to increase the size of their maximum ownership position in Herbalife to up to 34.99% of the Com